Coca-Cola Amatil is close to selling its Korean bottling operation to LG Household & Health Care. This has been a long process for Amatil who has been looking for a buyer for some time and although Amatil will not be receiving the price it originally wanted, it will at long last be able to hand over responsibility of the poor performing operation to someone else.
What makes LG Household & Health Care (LG), a company that sells household cleaning and personal care products, think it can do any better than Amatil? Importantly though, what makes Amatil think that LG will fare any better than it did, or is it just happy to offload the operation?
In answer to the first question; well, for starters LG is a Korean company and a highly successful and respected one at that in its country of origin. Secondly, it would appear that it has a better insight into the tastes of Korean consumers. For example, LG will use the purchase to launch into the lucrative green tea and health-focused beverage business. Something that Amatil apparently could not do or did not want to do. And thirdly, LG is likely to have a lot more patience than Amatil in netting the returns from the business. It certainly has a lot more to lose.
In answer to the second question as to what makes Amatil think that LG will do a better job (other than those sited above), I am not sure what Amatil thinks. I think it is just happy to offload! But a few things I do know - LG will not have the same loyalty to the Coca-Cola brand or for that matter, to the Coca-Cola stable of brands as Amatil had. LG will not have the same expertise in marketing beverages as does Amatil. And from what I have heard from people who have worked in LG, you can bet that they will have very different cultures. I am not sure whether that is a positive or negative by the way. Beyond the sale though - is any of this really of Amatil's concern or responsibility? I think it is.
The bottom-line is Amatil, and by inference The Coca-Cola Company has lost the battle in Korea. It simply could not go the distance. Its business model is no longer working. It has run out of innovative ideas (Strategy) and it has run out of talent (People). Korea was the grave-yard for several of Amatil's key executives. My concern is that it retreated from the Philippines, and now it is retreating from Korea. It needs to stop retreating if it is to remain a major player across Asia. And it certainly needs to take back responsibility. It needs to rethink its business model across Asia; it needs to relook at its talent bench and it needs to find that rare quality of creativity and business-nous that will enable it to grow in markets where it has to fight for market share and not necessarily buy it.
ian
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